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  • Writer's pictureIshfaaq Peerally

Never Bet Against America

🇺🇸 A common theme we see in Warren Buffett's letter $BRK.B every year is to 𝙉𝙚𝙫𝙚𝙧 𝘽𝙚𝙩 𝘼𝙜𝙖𝙞𝙣𝙨𝙩 𝘼𝙢𝙚𝙧𝙞𝙘𝙖. The US Stock market $SPX500 is in a bubble, even the bond market is in a bubble with a growing wealth gap and more socialism. Should we choose to invest in other countries instead?

🎈The main reason why the US Stock and bond markets are in a 𝙗𝙪𝙗𝙗𝙡𝙚 is because of Quantitative Easing from the Federal Reserve System. Nobody knows how the bubble will burst but a very likely scenario is that the Fed itself will burst it if they raise interest rates in case we have higher inflation. If the Fed doesn't act in case of inflation, real returns would be low and investors won't be happy.

🌏 𝙎𝙝𝙤𝙪𝙡𝙙 𝙬𝙚 𝙡𝙤𝙤𝙠 𝙖𝙩 𝙤𝙩𝙝𝙚𝙧 𝙘𝙤𝙪𝙣𝙩𝙧𝙞𝙚𝙨? In other Western Countries, things seems to be even worse than in the US with negative rates for example in Europe. The CAPE ratio on the S&P 500 is above 30 while in China it is around 10. But investing in China has risks since the financial system there is not as developed as in the West. Besides, China is State Capitalist country while the US is an Entrepreneurial Capitalist country.

🚀 This 𝙚𝙣𝙩𝙧𝙚𝙥𝙧𝙚𝙣𝙚𝙪𝙧𝙞𝙖𝙡 𝙘𝙖𝙥𝙞𝙩𝙖𝙡𝙞𝙨𝙢 in the US is what makes it such a good place to invest. There's always innovation and no company is safe. In 1997, GE $GE was the largest company in America and Apple $AAPL was on the brink of bankruptcy. Today, the tables have turned. In Europe (Big Firm Capitalism), the same companies that were there 50 years ago are still there. This creative destruction in America creates a large pool of possible investments. If you know where to look, you can always find investments.

💰 My advice is not to look at the S&P 500 or the market in general but at individual companies. Look for companies with low market correlation and always 𝙛𝙤𝙘𝙪𝙨 𝙤𝙣 𝙩𝙝𝙚 𝙛𝙪𝙣𝙙𝙖𝙢𝙚𝙣𝙩𝙖𝙡𝙨 𝙖𝙣𝙙 𝙡𝙤𝙣𝙜-𝙩𝙚𝙧𝙢 𝙧𝙚𝙨𝙪𝙡𝙩𝙨.

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My analysis on why this decade will be bad for US Stocks:


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